--VW benefits from gains in emerging markets, North America
--Sees increasingly stiff competition in Europe
--Audi premium brand remains largest earnings contributor
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paragraphs)
By Christoph Rauwald
FRANKFURT--Volkswagen AG (VOW.XE) Thursday reported higher
second-quarter profits and stuck to its full-year target of keeping
earnings stable despite large investments in new vehicles and
intensifying price pressure in Western Europe, where demand for
cars has been declining for months amid economic uncertainty.
"Our strong position in the international markets will enable us
to outperform the market as a whole - despite the challenging
environment," Volkswagen Chief Executive Martin Winterkorn
said.
The German auto giant's results highlight the difference between
car makers suffering steep losses as they rely largely on sales in
the shrinking Western European market and peers with a more
diversified global presence including a big footprint in more
dynamic markets, such as China, North America or Russia.
Volkswagen's second-quarter net profit rose 20% to 5.61 billion
euros ($6.79 billion) and surged 40% to 8.77 billion euros in the
first half of the year, boosted by a book gain related to option
valuations on Volkswagen's stake in sportscar maker Porsche and
higher profits generated from the business.
Operating profit rose 3.4% on the year to 3.28 billion euros in
the second quarter, while revenue rose 19% to 48.1 billion euros,
driven by a 13% rise in vehicle sales to 2.39 million units.
In addition to its consolidated operating profit, Volkswagen
earned another 1.8 billion euros through its two Chinese
joint-ventures in the first six months, up from 1.2 billion euros
in the same period last year.
Earlier this month, Volkswagen hammered out a deal to take over
the remaining 50.1% stake in Porsche Automobil Holding SE's
(PAH3.XE) sportscar unit it doesn't already own as of Aug. 1 for
4.46 billion euros in cash plus one common share.
Porsche, one of the world's most profitable car makers, will
join Volkswagen's stable of seven car brands, three commercial
vehicle brands and the newly acquired motorbike unit Ducati.
The Audi premium brand retained its position as Volkswagen's
largest earnings contributor in the first six months with a 13%
rise in operating profit to 2.88 billion euros, compared with a
3.8% increase to 2.21 billion euros at its namesake VW passenger
car brand.
The Czech Skoda brand contributed 449 million euros to operating
profit, up 9% while the operating loss at VW's troubled Spanish
Seat brand narrowed by 6 million euros to 42 million euros.
Volkswagen posted record vehicles sales and profits last year,
due mainly to its large footprint in emerging markets, superior
pricing power in the cut-throat European car market and sales gains
in the U.S. But the aggressive expansion, along with its growing
industrial complexity, has sparked concerns that the company is
becoming increasingly difficult to manage.
However, Volkswagen said it "remains confident about the second
half of the year" and expects to reach its goals for the year as a
whole.
Europe's largest auto maker by sales and the world's number two
behind General Motors Co. (GM) reiterated it wants to increase
revenue and sales volume in 2012.
Operating profit is expected to match last year's 11.3 billion
euros as large-scale investments are anticipated to offset higher
sales.
Volkswagen shares initially gained on the earnings numbers,
which analysts described as robust and slightly better than
expected. But the stock lost some ground later, which traders
attributed to profit taking.
At 0948 GMT, Volkswagen preference shares were down 3.5% at 129
euros while the DAX30 bluechip index was down 1%.
Write to Christoph Rauwald at christoph.rauwald@dowjones.com
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